Lease/Option my current house? Please help me to shape the deal

[Allende Hernandez]

Hi folks,

I'm considering moving to a bigger house and my decision is part will be based on how to make the deal work in my favor. 

I've considered renting current house, selling it and now I'm looking into a lease/option possibility that in paper looks like the winner. I'm trying to take the approach of avoiding a "can't do" and more a "how to do it".

As a starter, I have gotten some education in real estate investment a couple of years ago but wasn't able to nail a deal then.

Here is my situation:

Me and my family live in a house we bought in 2010 in Miami, FL. Due to the rebound of the market I should have approximately $185K in equity in my home. I refinanced a couple of years ago to a 15 years loan.

We have my in-laws moving with us so i'd be nice to move to a bigger house so we are kicking tires around.

We found this house for $419K which needs some work done, we are considering making an offer for $400K max.

How I would shape the deal: (It seems a little too good, so I'm afraid I'm doing something wrong here)

Step 1 - Cash out refi my current home 

Current Home:

1. Current Balance: $145K
2. Cash out: $100K ($80K down for the new one, $20K for repairs)
3. New Loan: $245K
4. Rate: 4.375%
5. New PI: $1248.00

Step 2 - Buy the new house

New Home:

1. Purchase Price: $400K
2. Loan: 320K
3. Rate: 4.125%
4. PI: $1551.00
5. Extra $20K for repairs

Step 3 - Sell my current home as a Lease/Purchase with a 5 years balloon and 30 years amortization

My debt to my Bank

1. Loan: $245K
2. PI: $1,248.00

At balloon I owe/have paid

1. Balance: $245K (I don't have my amortization table so I went worse case here)
2. In Mo/Pmt: 60x$1,248 = $74,880.00
3. Total: $319,800.00

My buyers to me

1. Purchase Price: $350K (about 20K above market price)
   
2. Non-Refundable Down: $35K (10%)
   
3. Loan: $315K
   
4. Rate: 6.5%
   
5. PI: $1,991.00

At balloon I'll get

1. Down payment at purchase: $30K
2. Mo. Payments: 60x$1,991 = $119,460
3. Balance: $294,875.00
4. Total: $448,335.00

So, if my numbers are realistic and correct, I'd end up making over $128,000 in 5 years if they don't cash me our sooner.

Considerations

- I know I need a good RE attorney to assist me through the process

- I still need to work in my exit strategies for each possible scenario

Questions

- Primary, does what I'm trying to do makes sense from a financial/investment point of view? 

- I'm increasing the price of the home given that my buyers are people that cannot qualify for a conventional loan. Is this a "good practice"? If so, is 20K a realistic amount?

- Is 6.5% a reasonable rate to my buyers?

- I know about the "due on sale" clause. How can I work around it?

- How would the homestead exception apply here given that my taxes are currently escrowed and any change in tax status will more than likely make it to the bank?

Please feel free to rip the deal apart and suggest new ways of making this deal work.

Any help is much appreciated,

Thank you!